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Law School Case Brief

Sheldon v. Metro-Goldwyn Pictures Corp. (1940) - 309 U.S. 390, 60 S. Ct. 681 (1940)

Rule:

Apportionment of profits can be had where it is clear that all the profits are not due to the use of the copyrighted material, and the evidence is sufficient to provide a fair basis of division so as to give to the copyright proprietor all the profits that can be deemed to have resulted from the use of what belonged to him. Both the Copyright Act and the Court's decisions leave the matter to the appropriate exercise of the equity jurisdiction upon an accounting to determine the profits which the infringer shall have made from such infringement.

Facts:

Sheldon and others' play “Dishonored Lady” was based in an 1857 trial of Madeleine Smith’s murder of her lover in Scotland. Metro-Goldwyn Pictures produced a movie “Letty Lynton” from a novel written by Belloc Lowndes, also based on the same story. The general skeleton of the story was already in the public; but, Metro-Goldwyn was not content with the use of that basic plot and so resorted to Sheldon et. al’s play. There were negotiations for the motion picture rights in Sheldon et. al’s play set at $30k but they fell through.

The District Court ruled that it would be unjust to award all profits to Sheldon et. al since motion picture stars made profits from their talent and reputations. It set the apportionment to 25% but ended up awarding everything to Sheldon et. al. The Court of Appeals agreed with the apportionment and set the apportionment to one-fifth of the profits.

Issue:

Was apportionment of profits given to Sheldon as part of the profits found to be attributable to the use of copyrighted material proper?

Answer:

Yes.

Conclusion:

The Court ruled that the Copyright Act provides for the recovery of profits from an infringed copyrighted work but limits it to that which the infringer shall have made from such infringement. Due to the absence of hard and fast rules regarding the formula for apportionment, the Court applied patent principles by analogy.

The Court agreed that although Metro-Goldwyn was guilty of deliberate plagiarism, it was not a ground to disqualify the company from earning profits from the movie. The Court gave credence to expert testimonies regarding the portion of the profits that may be attributed to Sheldon et. al’s play. Most of the witnesses stated that the play’s contribution to profits was very minimal and these testimonies were not rebutted by Sheldon et. al. According to the witnesses, most of the profits were attributable to artistic conceptions and expert supervision and direction of various processes. The Court ruled that the apportionment of 20% of the net profits was proper. The judgment of the Court of Appeals is affirmed.

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